- Smaller banks can compete with fintechs by using API-first, modular platforms and partner ecosystems to ship new capabilities quickly, as OneUnited’s rollout drove a 33% jump in feature adoption.
- Bank tech priorities skew to near-term security and fraud prevention (89% of execs) and longer-term GenAI (67% over three years), with many already piloting AI for fraud and personalization.
- McKinsey argues tech spend rarely creates differentiation because much is run-the-bank, so advantage comes from outcome-based, staged investments and reusable platform architecture.
- Winning strategy combines inward customer-data diagnosis, outward peer benchmarking, and forward roadmaps that manage vendor risk, privacy, and legacy debt while building for faster innovation.
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The primary article makes a strong case that banks and credit unions don’t need massive tech budgets—just a smart strategy based on three lenses: inward (customer data and unmet needs), outward (competition benchmarking), and forward (road-mapping and infrastructure). The case of OneUnited Bank illustrates this: using Candescent’s API-first, extensible platform to deploy features like financial wellness tools, instant digital card issuance, and improved onboarding, the bank achieved a 33% jump in customer engagement in just one month.
KPMG’s 2025 Banking Technology Survey corroborates these trends. Short-term top priorities for banking executives are strengthening security/fraud prevention and improving digital customer experience, with 89% and a similarly high share citing these initiatives respectively. Generative AI is emerging as a longer-term investment: only 33% mark it as a short-term priority, but 67% prioritize it over a three-year horizon. Another KPMG finding: 78% are already piloting or deploying AI for security/fraud, and ~85% for personalization/data-driven insights.
McKinsey’s research, “Unlocking Value from Technology in Banking,” adds a cautionary note that high tech spending does not necessarily yield competitive advantage. Many banks spend ≈10% of revenue on technology, but much of that goes to run-the-bank costs—regulation, compliance, legacy maintenance—leaving little discretionary capacity for innovation. Value comes from outcome-based programs, staging investments where impact is meaningful, and platform architectures that permit speed and reuse.
From an investment banking perspective, these trends imply big shifts in risk and opportunity. Institutions that fail to modernize may lose market share not to other banks, but to fintechs and Big Tech. Core/core-legacy tech becomes a risk; meanwhile partnerships and platforms, GenAI, real-time payments, embedded financial services—these are the vectors for future differentiation.
Open questions include: how successfully can regulators adapt supervision to support safely scaled partnerships? How will smaller institutions manage vendor risk, data privacy, and technological debt? And how to measure and attribute metrics that correlate partner-ecosystem investments with shareholder returns?
Supporting Notes
- OneUnited Bank used Candescent’s API-first, microservices-based platform and saw a 33% increase in customer adoption of enhanced digital banking tools.
- 80% of business users in Candescent’s platform had accounts connected to third-party invoicing and accounting tools, and when their financial institutions provided integrated invoicing tools, deposits rose by 18%. [Primary article]
- KPMG survey: 89% of banking executives rank security and fraud prevention as a top investment over the next year, ahead of GenAI at 33%; over three years that flips (fraud/security drops to 12%, GenAI rises to 67%).
- Also from KPMG: 78% are piloting or deploying GenAI/AI for security/fraud; 85% using or considering it for customer experience or personalization.
- McKinsey finds banks spend 9% annually on tech vs. 4% revenue growth; most tech spend serves regulatory compliance or run-the-bank activities rather than creating differentiation.
- McKinsey estimates banks that focus on strategic themes and tech transformation can improve return on tangible equity (ROTE) by 3-4 percentage points.